Use of Country Purchasing Power Parities for International Comparisons of Poverty Levels: Potential and Limitations
Use of Country Purchasing Power Parities for International Comparisons of Poverty Levels: Potential and Limitations
This chapter takes up two interrelated issues of monetary measures of poverty: what prices and what expenditure weights should be used when comparing the purchasing power parity of currencies. The first section evaluates methods of estimating poverty through the late 1990s. The second looks at the sensitivity of an international poverty PPP to alternative aggregation and weighting methods. Some of the conclusions are that a consumption-based PPP is preferable to any GDP-based PPP, as are percentage weights rather than actual weights for expenditure distributions. The latter should be adjusted using an iterative approach that combines own country average-income shares and low-income household expenditure shares, or at least representative shares of a low-income country. Lastly, references to these methods are made with respect to the differences in the poverty PPPs, and global poverty counts of the World Bank and of Deaton and Dupriez (2009).
Keywords: purchasing power parities, average income shares, aggregation methods, expenditure distributions
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